1. If membership falls in labor unions and unions become less popular, then:
Production costs will increase, SRAS will shift to the left, decreasing equilibrium GDP and increasing the aggregate price level.
Production costs will fall, SRAS will shift to the right, increasing equilibrium GDP and lowering the aggregate price level.
Production costs will not change, AD will shift to the right, increasing equilibrium GDP and aggregate price level.
Production costs will fall, there will be a downward movement along SRAS, equilibrium GDP will increase and aggregate price level will fall.
2. If the short-run macroeconomic equilibrium is _________ of the economy's potential output, then there is a(n) ________ and the aggregate price level is expected to ________.
to the left; inflationary gap; fall
to the left; recessionary gap; fall
to the right; recessionary gap; rise
to the right; inflationary gap; fall